American Politics & Public Policy Workshop: Michael Herron, Dartmouth

Michael Herron

Professor of Government, Dartmouth College

“A Model of Department Grading Practices and Student Choice”

Abstract: We present a formal model in which two academic departments in a university simultaneously announce their grading policies – either real reporting or grade-inflating – and subsequent to that students of varying abilities choose either to enroll in a department or to drop out of school.  In the model each department faces tension between the desire to maximize enrollment and the quality of enrolled majors.  Students similarly face a conflict between selecting a grade-inflating department, which requires relatively low effort but leads to a transcript that does not reveal true abilities, and selecting a real-grading department, which entails an effort cost but allows post-graduate institutions like employers to know true student abilities.  When the effort cost associated with enrolling in a real-grading department is zero, departments pool on either real-grading policies or grade inflation, and the student welfare implications of this depend on the value of education.  When the cost of enrolling in a real-grading department is high, and when departments differ in how much they care about student quality, the departments often separate – one inflating its grades and one producing real-grades – and the best students select into the real-grading department.  The presence of a grade-inflating department, which is attractive to mid-ability students, often leads to high aggregate student welfare.